Replies to This Discussion

Permalink Reply by Jonathan Katz on April 1, 2011 at 1:01pm

I don't know who thought of this but they don't do many short sales (or any). How are you going to give a lender a HUD (which they need) that doesn't show one of the mortgages. That just doesn't make sense just on basic principals. Unless I am missing something you need to step up the people you're working with.

Permalink Reply by L. Marvin Bultena on April 1, 2011 at 1:04pm

Not sure where you are located.  In North Carolina, I don't think two HUD-1s with the intent to conceal something from a lender (even though the concealment is from another lender) would go over very well with the Real Estate Commission.  I do believe I would object to it.

Permalink Reply by Angela Alfe on April 1, 2011 at 4:47pm

It's not concealing...it's trying to get MORE for the 2nd lender from the 1st lienholder and getting the 2nd to approve a lesser amount, just in case the higher amount does not get approved.

 

It's a good negotiating tool.  For instance, when the 2nd approves a lien release of $8,000 and the 1st approves $13,000 to get paid to the 2nd, you can go back to the 2nd and say, "Hey, we can get you an additional $5,000 for a FULL PAYOFF--no deficiency--approval."  Otherwise, if you send the HUD with the higher amount ($13k), they'll approve it on that amount and then if the 1st says they'll only pay $8k, you have to find another $5k.

 

The corrected, approved HUDs are definitely used at close.  It's not illegal or immoral or whatever at all...just a negotiating tool.

Permalink Reply by Smitty on April 1, 2011 at 1:06pm

I'm not intending to conceal.  The second lender is getting the HUD showing what we intend to offer them.  Are they entitled to see what the first lender is getting?  That's what I'm trying to establish.

Permalink Reply by L. Marvin Bultena on April 1, 2011 at 1:16pm

No matter what the intent is, that is the end result.  I would object to it, and get it on record that you do object. 

Permalink Reply by Jonathan Katz on April 1, 2011 at 1:15pm

Again, They will ALWAYS ask for a COMPLETE HUD. How to they that their net isn't being reduced because of a ton of junk fees. I mean that is only one of millions of possible reasons why they would need to see a HUD. This is short sales 101. Now if you're talking about settling with them that is a different scenario and then it doesn't matter that it is a short sale because they are settling for some arbitrary amount but the short sale again would not play a roll in their decision making.

Permalink Reply by Vanessa Calhoun on April 1, 2011 at 4:25pm

I typically use this strategy when there's a second mortgage involved. I don't see it as a "concealment" issue because 1) the HUD that is submitted along with the offer is preliminary only, 2) everything is simply a "scenario" until we have a written approval from all lienholders, and 3) the final HUD will detail every financial aspect of the scenario and will have to be approved by all lienholders prior to closing anyway. I'd rather for all parties to see proceeds for each party at the beginning of the approval process then at the end. You run the risk of too many problems at the end run of the transaction.....especially if the first is being made whole and the second is receiving less than 10%.  Besides, I've never run into a situation in which the second was "okay" with not knowing what the first was receiving.

Permalink Reply by Angela Alfe on April 1, 2011 at 4:50pm

Exactly...and the 2nd's who give you a hassle about what the 1st is getting, LOL...well, that's what happens when you're the 2nd lienholder.  It's why, when they took on that 2nd mortgage, they had to sign a legal document that stated they know they are in 2nd lien position and if the borrower defaults, they get diddly.

 

There is no way to not disclose how much the first is getting...any negotiator intelligent enough can do the math and figure it out for themselves...unless you just send a HUD with no fees, just the amount going to the 2nd...and that most likely will not fly over, either.  I guess you could always try and see what happens??  I wouldn't bother with it...but, to each their own...

Permalink Reply by Smitty on April 1, 2011 at 5:08pm

The discussion was about only sending the second lender what they are getting as the preliminary to see if they will approve.  If they do, then send the final HUD where everything matches the first HUD.  I think you are on the exact tract to what I am thinking Angela.

 

@ Johnathan - we will give them a final HUD which will accurately show them the payouts to everyone.  the discussion is about sending a preliminary HUD with ONLY what they are getting to see if they will approve at that amount.  We always PAD the HUD too..so yes, there will be added fees that may affect their net.  It's a negotiating tool.  That way when they come back and say "we don't agree to pay that" we can take it off and they now feel like they've done their job in getting more money.  The padded fees don't make it to closing if they aren't realistic fees but some fees we add on are water or utility payoffs, septic approvals, closing costs, cleanout fees, smoke certifications, survey fees, appraisal fees...now these are all fees that will have to get paid at some point in the process, but if the lender agrees to pay them, it's less out of the buyer's or seller's pocket.  We pad the HUD on purpose.  The lender has every right not to agree to pay them, but many times they do and we've just saves someone some money.